Sunday, July 12, 2009

Normal People Operations

There are reputations on the line here, as I predicted Oil to reach about $54/ barrel, and stay there for the rest of the year. Now, Phil Verleger comes along and suggests that Oil will drop to $20 a barrel. I don’t think either of Us are Crazy (???), and Oil has a habit of defying all Expectations. One has to ask if the Oil Producers will pump at $20/barrel–I really don’t think so; it is even a place where Creditors will grant loan extensions for a premium. Oil did drop to $31/barrel in December, but then We find the fact of the Run back to $70/barrel; a suggestion that exactly such an accommodation had been reached with Creditors. The second Fall-off is only indicative of the limitations of such adoptions, though they are powerful enough to keep the price of Oil above $40/barrel, combined with the wonderful World of Speculation. I still believe in the $54/barrel price with a Plus or Minus of $4. I am happy no one keeps track of my miscalculations.

Mark Thoma, Robert Frank, and Paul Krugman give Us a very presentable exercise of Why the interest of the individual participant in an economy can be adverse to the entirety of operation of the economy. Individual Gain festoons the economy, only if there is ancillary benefits to the greater economy. The one point that None explore, which separates the economy from the environment, remains the factor of limited resources on which all must rely in the Economy. Individual activity in the economy places limitation of the venue of opportunities for all participants in the economy; this limitation exhibits by way of higher Resource pricing. Individual efforts which do not expand additional performance in the greater economy can choke previously effective sectors of economic performance. Am I flying through the Trees here? It is sufficient to state there is major impact from this element.

Bad mortgages are with Us in huge Waves, and people ask Why Lenders will not renegotiate the loans with a lower Principal balance; considering the immense losses incurred in Bankruptcy. There is the fact that 30% of the bad mortgages are successfully paid off, with only delays in the Payment schedules at Interest. There is also the fact that approximately 20% of the total loan repayment has already been made by the Time of default by the Lender, and the Housing enters Bankruptcy Court at full value; from which Lenders have an actual less than 80% Stake. The rationale which I find most compelling, though, is the Tax Write-off of the Loss as justified by forced Sale; rather than a contestable loss of internal Lender decision. Lenders are not actually known for being Risk-Takers, even under the best conditions. lgl

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